Retirement 2.0blog

New Social Security rules and divorce

Two sets of benefits exist for ex-spouses depending on their birth dates

Nov 15, 2016 @ 2:05 pm

By Mary Beth Franklin

Social Security benefits for divorced spouses remains one of the few fertile areas where strategic claiming strategies can make a big difference in retirement income planning — depending on the ex-spouses' ages. I encountered many questions on this important topic when I addressed the Association of Divorce Financial Planners' annual conference in Las Vegas in October.

As a result of the Bipartisan Budget Act of 2015, there are now two sets of rules that apply to claiming strategies for divorced spouses. But before I dive into what is new, let me review the basic rules of how a divorced spouse qualifies for Social Security benefits.

(More: Advisers still baffled by key rule changes to Social Security claiming strategies)

As long as an individual was married at least 10 years, was divorced and is currently single, he or she can collect Social Security benefits on an ex-spouse's earning record as if they were still married — even if the former spouse has remarried.

In addition, as long as the couple has been divorced at least two years, an ex-spouse is “independently entitled” to claim benefits on a former spouse's earnings record even if the ex-spouse has not yet claimed benefits. However, in order to be independently entitled to benefits, both ex-spouses must be at least 62 years old.

In some cases, an ex-spouse can file a restricted claim for spousal benefits only, allowing him or her to collect spousal benefits — worth half of the ex-spouse's full retirement age benefit amount — while their own retirement benefit continues to grow by 8% per year up until age 70. That is where the new rules kick in.

Now, only those people who were born on or before Jan. 1, 1954, are eligible to restrict their claim to spousal benefits when they turn 66 and allow their own retirement benefits to grow up until age 70. Ex-spouses who are still eligible to choose which benefit to claim can each file a restricted claim for spousal benefits on the other's earnings record at 66. Married couples can't do that. Only one spouse in a marriage can claim spousal benefits.

But younger married and divorced spouses will never have the option of choosing which benefit to claim because of the new rules. People born on or after Jan. 2, 1954, will be deemed to file for all available benefits — both spousal and their own retirement benefit — when they claim Social Security, and will be paid the higher of the two benefits.

(More: Gradually converting a traditional IRA to a Roth can boost nest egg)

However, the deemed filing rule does not apply to survivor benefits. So if a divorced spouse had not yet claimed Social Security and her ex-husband died, she could claim survivor benefits first and switch to her own maximum retirement benefits at 70. Or, depending on her age at the time of his death, she might be able to claim her own reduced retirement benefits first and switch to unreduced survivor benefits at her full retirement age.

Claiming strategies can be challenging when ex-spouses' birthdays fall on either side of the Jan. 1, 1954, demarcation line.

One financial adviser I met in Las Vegas asked me to recommend a Social Security claiming strategy for a divorced couple where the ex-husband is the higher earner but is five-years younger than his ex-wife. The ex-wife, currently 64 years old, was born in 1952. The ex-husband, now 59, was born in 1957 and has since remarried.

“I think it makes sense for you to file a restricted application for spousal benefits on your ex's earnings record when you turn 67 and he is 62,” I told her. “That will allow you to collect half of his full retirement age amount while your own benefit earns delayed retirement credits of 8% per year. At 70, you can file for your own larger benefit.”

(More: Big gap between Social Security cost-of-living adjustment and retiree inflation)

But her ex-husband will not have the same options for two reasons: He was born after Jan. 1, 1954, and he has remarried. His only option is to claim his own Social Security retirement benefit. Although I don't know the details of his current marriage, he may want to wait until 70 to claim his maximum retirement benefit, which will also translate into a maximum survivor benefit for both his current wife and his ex-wife. They are both entitled to full survivor benefits depending on their age at the time of claim.

There is one more rule change to keep in mind for divorced clients. Under the new rules, a worker who claims reduced Social Security benefits early can still suspend benefits at full retirement age in order to earn delayed retirement credits. Normally that means any auxiliary benefits for a spouse or eligible minor dependent child or permanently disabled child would also stop during the suspension. But suspending benefits does not affect the benefits of an ex-spouse.

(Questions about new Social Security rules? Find the answers in )

Mary Beth Franklin is a contributing editor to Mopedia and a certified financial planner.


What do you think?

View comments

Recommended for you

Upcoming Event

Apr 30


Retirement Income Summit

Join Mopedia at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Advisers are hungry to find new alternative investment opportunities. But Rupal Bhansali of Ariel Investments says the secret weapon could be right under your nose - in cash.

Video Spotlight

Sponsored by Prudential

Recommended Video


Latest news & opinion

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.


Subscribe and Save 60%

Last News

merrill lynch wealth management 401k california muni bond funds vanguard 500 index fund share price filing social security taxes how to collect dividends from stocks vanguard intermediate tax exempt admiral ridgeworth small cap value equity i vwstx pension plan lump sum calculator vanguard target retirement 2040 turbotax filing fees yoda and luke in the swamp conversion from traditional ira to roth ira vanguard 500 index fund signal shares american funds growth fund of america r6 largest mutual fund families by assets under management part d income related monthly adjustment amount vanguard s&p 500 index mutual fund fixed index annuity with income guarantee what is a deferred variable annuity first republic investment management san francisco nick murray the new financial advisor morning star bookstore ri tiaa cref lifecycle 2050 fund top ten most expensive baseball cards deadline for roth ira contributions wasatch emerging markets small cap blackrock floating rate income fund social security withholding max state of washington unclaimed funds age to withdraw from ira without penalty allied interstate contact number charles schwab mutual funds list american funds morningstar ratings